For many craft breweries, beer volumes aren’t what they used to be, even just five years ago. In his midyear state-of-the-industry presentation, Brewers Association chief economist Bart Watson laid out the current quagmire:
The amount of packaged craft beer sold at grocery and other chain retail is shrinking: Over the most recent 52-week period tracked by market research company Circana, the category is down -6.7% in volume and -2% in dollar sales despite increased prices.
Draft beer hasn’t rebounded to 2019 levels.
And while the total volume of beer sold through brewery taprooms is increasing (by an estimated +6% this year), with the number of breweries in the U.S. also growing, each taproom gets a smaller slice of that pie.
In short: Sales growth in craft beer is hard to come by. If small breweries want to grow sales volume (or even maintain what they already have) and feel maxed out in their home markets, that has typically meant looking to new geographies in which to sell their beer. But this is not as easy as it once was.
“The game has totally changed,” says Nick Firestone, chief operating officer of Firestone Walker Brewing Company in Paso Robles, California. “It used to be we were just turning markets on—just sign the contract, and ship the beer out there. Done. At the end of the day, right now, the craft market isn’t growing volume.”
This doesn’t mean craft breweries are expanding their sales geography in 2023, however; they’re just doing so more carefully and through new models, including ecommerce. Some of that expansion is dictated by a desire to maintain production levels while overall craft beer sales decline: If beer sales aren't growing at home, breweries have to look further afield. Ahead, how craft breweries large and small are approaching sales expansion today.
In this two-part Sightlines series, we’ll examine the opportunity—and the obstacles—facing craft breweries as they think about selling their beer through channels wide and narrow. From brewpub-only models to nearly national distribution, these case studies provide lenses through which to understand the complex geography of craft beer sales in 2023. Read part one—about breweries focused solely on their home states—here.
This second installment features three breweries who have expanded sales far beyond their home markets.
JESTER KING
‘A LITTLE BIT OF BEER IN A LOT OF PLACES’
In early 2023, beers from Austin, Texas-based Jester King Brewery hit shelves 1,400 miles away in Montana, part of a general strategy the company had followed for years. Over time, out-of-state distribution has become a majority of sales for the business.
“Our business model as it relates to sales and distribution has been ‘a little bit of beer in a lot of places,’” says Jester King co-founder Jeffrey Stuffings. “It’s been about expanding the number of places we send beer in an effort to meet our sales numbers.”
Jester King works with craft-focused, specialty distributors to sell its beer in 42 states. While the brewery is grateful for those sales—Stuffings says they were particularly a lifeline during the height of the pandemic—its plan for 2024 is to try to concentrate more of its sales volume closer to home, in central Texas.
“As we’ve seen our out-of-state distribution market spread thinner and thinner and to more and more places and new markets, the feeling is: How sustainable is this?” Stuffings says.
Jester King currently ships some of its beer as far away as Illinois, Massachusetts, North Carolina, and Florida. Stuffings says the brewery can sustain itself by producing 2,000 to 2,500 barrels (BBLs) of beer annually, a target it missed in 2019, 2020, and 2021, but hit in 2022 when it brewed 2,015 BBLs, per Brewers Association data. Next year, Stuffings would like to sell that volume of beer, but with a much greater portion of sales coming from its home turf. That way, the brewery would make more money by self-distributing its beer in central Texas (avoiding distributors’ margins) and by reducing shipping costs.
“Our sales manager said, ‘Jeff, we’re 10 miles wide and an inch deep. If we’re going to develop into a truly sustainable model, we should be focusing more on our own backyard,’” Stuffings says, adding that Jester King currently sells about 17% of its beer in Texas. “We’ve seen it go too far in terms of finding markets for our beer where now we’re in over 40 states and two dozen countries and on half a dozen beer [sales] platforms … I feel like that’s just too far in the wrong direction.”
In the last four months, Jester King has returned to self-distributing its beer in central Texas, ending its relationship with Flood Distribution and firing up its own two vans for deliveries. But while it retrenches at home, it’s still bullish about out-of-state sales—just in a new way.
This summer, Jester King signed on with Bevana, a beverage platform that connects breweries with drinkers across the country, to launch ecommerce sales in 42 states. (Texas law prohibits breweries from shipping beer themselves.) Notably, Bevana doesn’t take as large a margin as a traditional distributor, so Stuffings says it’s “the next best thing” to direct-to-consumer. Right now, sales through Bevana account for under 5% of the beer sales that Jester King does via distribution, but Stuffings says that if Jester King were to potentially release certain specialty beers exclusively through Bevana, that could tick up to 20%.
For Stuffings, a renewed focus on Jester King’s home market and expanded ecommerce sales to 42 states isn’t contradictory. It’s about getting to a 50/50 balance, he says, of in-state versus out-of-state sales while maintaining flexibility in sales models.
“Generally speaking, adaptability has been the name of the game,” he says. “It feels like things are starting to normalize, though. I will gladly take a few years of no drama and change in this industry.”
OUT OF MARKET
NORTHEAST HYPE BREWERIES GO LONG
Beers from Boston-based Trillium Brewing were once defined equally by the difficulty of acquiring them as by their quality. Lines out the door, beer traders purchasing cans by the box full—Trillium was, at the end of last decade, the definition of a hype brewery. But year by year, the brewery has expanded the availability of its beers: Trillium now operates two taprooms, a brewpub, and two outdoor beer gardens—all in the Boston area—plus a farm brewery in Connecticut. It ships beer directly to nine states and Washington, D.C., and has begun selling beer at retail further afield, reaching bars and bottle shops in Smyrna, Georgia; Lockport, Illinois; and Wauwatosa, Wisconsin.
Another East Coast brewery has similarly expanded its sales territory: Middleport, New York’s Equilibrium Brewing—named to a 2019 Gear Patrol list of “Most Hyped Breweries”—now ships beer to more than 30 states and distributes as far away as Montana and Texas. Today, even beers from Hill Farmstead, the destination brewery that helped create the concept of the beer pilgrimage, can be found on draft at a sports bar like Captain Jack’s Goodtime Tavern in Sodus Point, New York.
Why? As overall craft beer growth slows, breweries need to either find more drinkers in their home markets, or new drinkers in new markets. By going farther afield, these breweries can cash in some of their long-standing cachet with beer enthusiasts, even if it costs $30 for a four-pack of 16oz cans. Expansion for places like these Northeast breweries comes at a time when overall growth has stalled or declined:
Trillium hasn’t returned to its pre-pandemic production levels: It brewed a high of 22,500 BBLs in 2019, per BA data, before falling to roughly 15,500 in 2020 and 2021, and 14,100 in 2022.
Equilibrium grew production substantially between 2017-2020, going from 1,694 BBLs to 6,000. Production plateaued at 6,000 in 2021, the most recent year for which the Brewers Association [BA] published production data for Equilibrium.
(Trillium and Equilibrium declined to answer questions about sales models and production levels.)
“It makes my job a whole lot easier now that these East Coast breweries are willing to work with distributors out here,” says Shibli Haddad, owner of Pasadena, California’s Arroyo Shell, a gas station revered by craft beer fans for its wide selection of specialty beers. “Pre-pandemic, it was very difficult. Then out of nowhere, they flooded into the state, which is great. Customers want this stuff. They love it and I’m more than happy to sell it to them.”
Haddad sees little downside for breweries or drinkers when these beers hit his shelves: He’s connecting eager fans with breweries they’re excited to try. At $6.50 to $9 per single 16oz can, the out-of-state beer is higher priced compared to local breweries, which does lead some customers to purchase fewer cans. Still, Haddad says, they’re eager to try something new. He does worry that the need for breweries to begin selling more in distribution could signal that breweries are seeing slower sales at home.
“I’m speaking purely for the California market, but taproom sales are down here,” Haddad says. “Even local stuff that I could not get before, I’m able to get plenty of now.”
BURIAL
TAKING DTC PERSONALLY
Historically, Asheville, North Carolina’s Burial Beer has hardly distributed any beer outside of its home state. That’s been for a simple reason: It hasn’t had the capacity to, selling all of the 12,500 BBLs it produced last year via established markets. That home market includes three taproom locations in Asheville, one in Charlotte, and another in Raleigh, with plenty of placements in chain retail and small bottle shops across the state. (It’s done very limited distribution drops to Atlanta in recent years.) But this summer’s addition of a 60-BBL tank dedicated solely to the brewery’s flagship IPA, Surf Wax, has freed up Burial to get more serious about direct-to-consumer shipping. Shipping beer to drinkers was a practice Burial began during the height of the COVID-19 pandemic, but it hopes to grow that sales channel next year.
Burial is a brewery that prefers to keep control over its beer and drinkers’ experience of that beer as much as possible. (The brewery pretty much insists on creating its own playlist for off-site tap takeovers and other events.) So while other breweries look to third-party services to ship their beer boxes, Burial takes a hands-on approach, with staff handling the packaging and shipping of direct-to-consumer orders placed through Burial’s website. Burial ships to 13 states that legally allow this, including Nevada, Vermont, and Nebraska, representing 7% of Burial’s sales volume.
Generally, the idea of selling beer in distribution far beyond the brewery is unappealing, says Phil Cassella, Burial’s head of marketing. Burial only distributes its beer in its home state and a few nearby markets in South Carolina. But it believes in the connection—and the margins—that come from shipping beer directly to fans in other states. Because of that, it’s invested in its ecommerce capabilities, overhauling its website earlier this year to integrate with Shopify and exploring unique ways to make the unboxing experience unique for customers (sticker sheets, customized playlists, and “private-label gummy worms” are all on the table). Bar staff from Burial’s flagship location in the South Slope neighborhood of Asheville have dedicated shifts for packing and managing ecommerce orders.
“We’re starting to look at some marketing efforts, trying to reach consumers in the states that we can ship to because we still think there are a lot of folks out there who just aren’t aware of it,” Cassella says. “We’ve also seen other breweries scale back and end beer shipping [since launching it during COVID] and we hope that just means there’s more room for the breweries still doing it.”
Cassella says Burial has enough of its own hospitality spaces that it won’t need to expand distribution sales to new geographies any time soon. The company is content with its current production volume and doesn’t anticipate expanding capacity anytime soon. But if it can make better margins on the beer it does brew—selling more directly to consumers versus distributors and retailers taking a cut—that could only improve the bottom line.
“It’s enough [of a revenue generator] that we definitely put time and effort into it.”
Words by Kate Bernot